Inheritance Drama: You Got Any? Stories Wanted.

[4alpacas]

It's amazing. I have had the unfortunate experience of watching a few older folks who spend their golden years wasting away in front of a TV, or computer, spewing propaganda from Fox news and the like. They then develop the delusion that they (being white,and the chosen ones) have "earned" everything they receive from the social welfare system, and more.  They are also convinced that, as special snowflakes, they are in fact NOT getting a dime from any socialist program, only having their hard earned contributions returned to them. This coupled with the fact that they are entitled to keeping all of their assets, until such time as they transfer to the children, since the "government only wants to steal it".  Naturally, all this is accompanied by the less than subtle racist undertones that "others" don't deserve the same benefits, since you know......................

The cognitive dissonance is amazing, they use roads and infrastructure paid by the state, healthcare, social care and every facet of their life involves state expenditure.  Its worse in the UK with the elderly not realising a hospital bed costs £300 a night,  that one week stay with sepsis wiped out probably a year of tax they paid in one go.  Hip replacement £7,000...  it goes on and on.  Then they likewise get racist and blame immigrants for the NHS's struggles, especially with brexit, not realising young immigrants are one of the main reason the UK's health service is still standing despite the greying of the country.

How do you combat this? My mom has suddenly (at least that her DD's knew of) turned into the worst example of US Conservative there is. Racist, prejudiced, intolerant, etc. If you don't discuss politics or current events, you'd never know.

Maybe if you get her out of her bubble.  If she has positive, personal interactions withe people who are different than her, then she probably won't be so scared of different types of people. 

[talltexan]

I'm seeing all these descriptions of wonky political disputes within families (and yes, mine has some of these as well). But have they lead to inheritance drama? Sons being ommitted from the estate because they had the nerve to vote for Ralph Nader?

[Just Joe]

Are we witnessing how someone becomes radicalized?

Get a 100% pure dose of whatever ideology often enough to the exclusion of other ideas - and a person gets a little extreme - assuming they are the type who can be persuaded.

Is this similar to leaving our previous life roles as good American consumers in favor of frugality?

Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...

[zolotiyeruki]

Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...

You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P

[Cowardly Toaster]

Oh no here it goes.

[Abe]

Sudden behavior changes in elderly may be a sign of dementia. Some types can be associated with rapid downturns with disinhibition. The other possibility is they were racist to begin with and finally feel comfortable joining in the fray.

[zolotiyeruki]

Oh no here it goes.

Sorry, I didn't mean to start anything--just trying to inject a little perspective with a bit of humor before anyone gets stuck in an echo chamber :D

[infogoon]

Sudden behavior changes in elderly may be a sign of dementia.

Sometimes it's a sign of "nothing to do in retirement but watch cable news and melt into the couch".

[Sofa King]

Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...

You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P

I concur!!!

[jinga nation]

Still can't see how anyone could support Trump with all his bad behavior. Lousy manners, hateful friends, mental issues, communication issues, selfish, and on and on and on...

You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton on more conservative sites!  :P

You know, it's funny, because I see those exact sentiments expressed about Hillary Clinton and Donald Trump on Libertarian sites!

[Just Joe]

Oh no here it goes.

Sorry, I didn't mean to start anything--just trying to inject a little perspective with a bit of humor before anyone gets stuck in an echo chamber :D

Yep - backing away from the abyss. Sorry folks...

[talltexan]

My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

[mtn]

My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

I've always had a problem with estate taxes. I understand them, but the money has already been taxed--probably multiple times (income, then capital gains). Then they tax it again?

Obviously nowadays it is a HUGE estate if it is getting taxed, but it still irks me.

[radram]

My wife claims her parents have become much more extreme conservatives over the last ten years (which completely envelope our relationship).

10 years ago this month, her grandfather died, and her father managed the estate. We weren't married at the time, but based on several clues, I've calculated that more estate tax was paid than the total career  after tax earnings of my father-in-law up to that point. That sort of event has to burn, having the gov't take away that kind of cheddar in one moment (and a moment in which you're hurting).

I've always had a problem with estate taxes. I understand them, but the money has already been taxed--probably multiple times (income, then capital gains). Then they tax it again?

Obviously nowadays it is a HUGE estate if it is getting taxed, but it still irks me.

This is no longer precise under current law. It is true that taxes would have been paid for income, some dividends, rents collected, etc. It is also true that taxes would have been paid on monies used to buy investments (stocks, bonds, property, etc.), unless of course they were purchased within a tax sheltered account.

 There are no capital gains taxes on any unrealized gains until they are realized. As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.

With a tax sheltered account, the government realizes the money has never been taxed. As a result, the beneficiaries are responsible for paying the tax on distributions. Would you agree that is fair?

What I see as unfair is that all unrealized gains are not treated the same way as tax sheltered accounts. It seems unfair that millions of dollars of wealth can be transferred without ever paying a tax.

I also disagree with different monies being taxed at different rates (income vs. capital gains for example). My .04% checking account, my rents collected, and bonds are taxed at my income rate (25%), but my qualified dividends are taxed at my capital gain tax rate (0%). Unfair, yet I am taking full advantage. Under current rules, income is for suckers.

I would expect future tax law to modify this by treating rental receipts as a capital gain instead of income. Why? What does Trump do for a living? Also, if you think the estate tax exemption is huge now, just wait. I truly believe it will be 0% tax for 100% of all estates in the next 4 years. It sounds like this is what you want, but I find it anything but fair. I still intend to take full advantage, as I hope you do as well.

Good day to you.

[dogboyslim]

I didn't realize that the basis was reset on an inheritance.  I thought it stayed the same as it was for the deceased.

I would agree that makes no sense.  I don't think it should be forced to be recognized as a gain upon passing of the asset either, but the gain (when sold) should be off the original basis.

[Just Joe]

Doesn't make a good case for shifting wealth to your children bit by bit long before death?

[Sibley]

Doesn't make a good case for shifting wealth to your children bit by bit long before death?

It depends on the specifics of the situation. There are cases where gifting during life is a better idea than inheritance, but you really need to get a tax expert involved to determine it. I used to know one, and worked as staff on a few projects with him. It is not simple.

[radram]

Doesn't make a good case for shifting wealth to your children bit by bit long before death?

Shifting wealth is also interesting and a bit unfair to me as well.

I can give a total of $14,000 to each person I choose tax free. Yet when I pay my daughters $10.00 an hour to help paint our rental property, it is taxed as income for them.  So I can give them money tax free for doing nothing, but they are taxed for earning it. Just sounds messed up to me.

It just doesn't seem right that I can gift anyone I want 1 years salary of a minimum wage earner for doing nothing, yet the minimum wage earner pays SS, medicare, and even a little income tax. My giftee does nothing to help society, yet the minimum wage earner contributes quite a bit.

[rpr]

I do agree. Giving heirs a stepped up basis makes no sense at all. It is one of the top 10 tax expenditures in the federal budget. Were we to get rid of this measure, it would save about $60+ billion each year.

http://www.taxpolicycenter.org/briefing-book/what-are-largest-tax-expenditures

[BlueHouse]

As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.

Don't forget about State Inheritance and tax laws.  In DC, the inheritance tax kicks in at $1M. 

[radram]

As you said, unless your estate is huge ($5.6MM single, $11MM married), all unrealized gains are transferred to beneficiaries having paid no tax. If you purchase stocks that do not pay a dividend, that can easily be millions of dollars in gains that were never taxed.

Don't forget about State Inheritance and tax laws.  In DC, the inheritance tax kicks in at $1M.

In WI, it is the same as federal, so $0 for 99.6% of all estates.

[nawhite]

Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

[TomTX]

Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.

[former player]

Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.

Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?

[Dave1442397]

I'm totally against the estate tax.

All the multi-millionaires I know (we're talking people with assets in the hundreds of millions) have structured their businesses to bypass the estate tax completely.

As an immigrant, three of the things I was amazed at in the Land of the Free were property taxes, estate taxes, and having to pay money to go to a beach (NJ shore).

[Paul der Krake]

Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.

Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?

Nah, the US is just fine on that front. Dynastic wealth is the exception, not the rule.

Inheritance taxes are a complex subject and it's really hard to draw any conclusions on what the best approach should be because wealth comes in all shapes and sizes. It's really, really hard to come up with rules that are fair to everyone.

[TheGrimSqueaker]

Estate taxes should have nothing to do with tax basis or what kind of income it was our anything else. It's a tax on dying with money because we as society think that people dying with money is bad for society long term. It leads to inequality, a landed gentry and oligarchy.

Personally I think the estate tax should be more like 100% on all assets over $10 million or so with no exceptions at all. It's enough to not need to sell most farms or houses and if liquid assets, it allows you to provide a median income to 5 children for the rest of their lives. That will never pass though.

The truly wealthy will hide it all in trusts and other shelters anyway.

Trusts and other shelters are all created under laws, and if the lawmakers wanted to ensure that money in them was taxed, they could.  The fact that they don't, and that the fact that they don't is used to argue against having the tax, is itself telling.

I'm with nawhite: estate tax is the only way to prevent oligarchy - which you pretty much already have in the USA, right?

Nah, the US is just fine on that front. Dynastic wealth is the exception, not the rule.

Inheritance taxes are a complex subject and it's really hard to draw any conclusions on what the best approach should be because wealth comes in all shapes and sizes. It's really, really hard to come up with rules that are fair to everyone.

Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.

A person who inherits, say, a home in a HCOL area might receive only a 2000 sqft place on a quarter of an acre (which is more than sufficient for the average Mustachian family), but if that quarter acre and 2000 sqft house is on Mulholland Drive, that individual might as well have received three full sections of arable land in wheat country, a light industrial real estate property that throws off $300k a year in income, a fair bit of VTSAX, or two paintings by reasonably famous people. If all those estates were taxed at a rate of, say 25%, the heir who received the home would most likely have to liquidate.

Here's my explanation. The VTSAX heir has the most options, and can use dividend or appreciated income in order to pay taxes. It's very easy to liquidate just a small portion. The person inheriting farmland is also sitting pretty. He or she could, at need, sell off a quarter-section or half-section to satisfy the tax man even though land isn't exactly a liquid asset. He or she could also borrow against the income producing capacity of the land (measurable in terms of rent or crop profit). After a few good years, the mortgage against the land will be paid off. In the event of a bad year, the crop is insured. The person with the light industrial property cannot sell off a portion of it and must borrow against income. If there is a vacancy the property bleeds value quickly. But after a few years the property should still repay the mortgage out of cash flow; the risk is just higher because it's harder to get insurance against losses in a bad year. You can insure against the place burning down (and the related loss of income) but you can't buy insurance against the tenant deciding to leave at the end of the lease term. The person with two paintings can potentially sell one of them, or borrow against the value of one of the paintings, but there's no cash flow associated with the paintings since they don't generate income. They also don't generate much in terms of expenses. As long as they're insured against fire and theft, and stored in a reasonable way, they don't cost a lot just to own. They can be kept for years and then sold. Any money to be made, or any disappointing losses, don't occur until sale. So the heir pretty much has to sell one of the paintings. If there's something about the paintings that makes them only valuable as a set, both must be liquidated to satisfy the tax. The person with the house, though, is pretty much screwed. Unless it's possible to rent the place out for income (unlikely, in that neighborhood), the heir will pretty much have to sell. There are significant expenses associated with owning the home because of property taxes and maintenance costs.

Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

[RecoveringCarClown]

Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

I never thought of it that way, but I agree with you. Thanks for pointing it out!

[Playing with Fire UK]

Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.
...
Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

The bit that really gets me is why the inheritance laws try to protect so many of these scenarios. If I've arranged my entire financial life so that my sole asset is a (literal or metaphorical) white elephant that is valuable but needs expensive feed and medical care why should my heirs be protected from my bad choices. They shouldn't be obliged to accept land or elephants that they don't want or the upkeep makes them uneconomic (this is already the case here, I think it is the same other places?). But I see no reason that estates should be protected anymore than I should be protected if I have all my wealth in my house and can't pay my cable bill. Or have all my wealth in my elephant and can't pay the vet. If you have an asset and can't pay a bill you need to raise capital or sell the asset.

[shelivesthedream]

Indeed, especially when wealth from a family business or farm that requires daily work and attention is treated the same as wealth from a stock portfolio. The assets don't behave the same way.
...
Trying to write a law that takes all those scenarios into account and taxes each person fairly would be nearly impossible. Estate taxes are vicious to people who inherit illiquid assets or assets that require upkeep or maintenance costs. For most non-Mustachian affluent people, a substantial amount of wealth is still in the family home. Most of us believe that if your home is your most expensive asset you're in serious trouble, but the vast majority of humans don't agree with us and the laws do tend to be written to cater to the majority. Or the influential.

The bit that really gets me is why the inheritance laws try to protect so many of these scenarios. If I've arranged my entire financial life so that my sole asset is a (literal or metaphorical) white elephant that is valuable but needs expensive feed and medical care why should my heirs be protected from my bad choices. They shouldn't be obliged to accept land or elephants that they don't want or the upkeep makes them uneconomic (this is already the case here, I think it is the same other places?). But I see no reason that estates should be protected anymore than I should be protected if I have all my wealth in my house and can't pay my cable bill. Or have all my wealth in my elephant and can't pay the vet. If you have an asset and can't pay a bill you need to raise capital or sell the asset.

I'm inclined to agree with this. If an estate is taxed so that an heir ends up with NOTHING, that is not very kind. But if an estate is taxed such that an heir has to either take on the normal responsibilities of owning such a thing (like putting down a deposit before you can own a house) or sell up, I can't really see what there is to object to. Even if they have to sell the house, they're still hundreds of thousands of pounds up on where they were before. You can't be all "Oh, boo hoo, I got a free thing and now I have to actually take responsibility for it which means I get slightly less free thing!"

I can see two scenarios in which this might be difficult:
1. If the person who died had died LONG before expected. Like if they made a will in their forties expecting to die in several decades time and then died the next day. I can see how the inevitably young heirs might not be prepared for that.
2. If you're leaving someone a house so they can live in it - like a disabled child. In this case, perhaps a fair law would be that no inheritance tax is paid as long as the child is living in the house but when they move out or die, the estate is taxed double? (Once for the original deceased and once for the disabled child?)

I quite like the idea of a high threshold for inheritance tax and 99% tax above it. I wonder what that threshold would need to be for inheritance tax receipts to remain the same. I don't know how to work it out. I did just do a quick google, though, and seems like in America you can leave $5.45m in your estate before paying any tax. Is that right? In the UK you're not taxed on the first £325,000 (or up to £650,000 if you're the surviving spouse - any unused exemption gets transferred), so people can get into real trouble leaving property, especially in the South East.

[talltexan]

I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

[radram]

The main reason these kinds of situations develop is due to the way the US allows heirs to inherit things with a stepped up basis.  It encourages elderly people to hang on to assets long past the time they may need or be able to manage them well, just to avoid the tax hit.   And the costs of not understanding this can be huge.  I am a little worried about my mom, for example.   She has gotten the idea in her head that since the people next door have expressed an interest in her house, maybe she should sell it to them.   I keep telling her that since her original plan was that the house would go to my brother, she should stick to that.  Because if she sells to the neighbors now, not only would she probably get less than it is worth (she thinks it is only worth the tax assessed value, which is way lower than market value), she would take a HUGE tax hit.  Whereas if we hang on to the house until she passes, my brother would then get the house at the stepped up basis, and be able to sell it for much more (he is not sentimental about it going to the neighbors) besides.

Reminder to self:  Put getting a meeting with a lawyer scheduled on the to do list soon.   We need proper power of attorney to make sure mom doesn't do anything crazy.....

Don't forget the $250,000 federal capital gains exclusion of primary residence. Is her gain, less cost basis, higher than that? Did you remember to include all repairs to the home like roofs, remodels etc.


Your post sounds like you believe your mother can no longer make decisions for herself. If so, I wish you well. Trying to convince your mother, or a court, that her decisions need to be scrutinized is hard to be a part of. You are essentially saying her mind is no longer capable of telling right from wrong. The fact that she did not set this up ahead of time makes it much more complicated and difficult.

[radram]

The house was built in the late '60s/early '70s.  A new roof was put on several years ago, but it has otherwise not been updated.  But it is a fairly large waterfront property within an hour's drive of Seattle.   The capital gains will far exceed the $250k tax-free allowance (my mom was widowed over 30 years ago).

She is still with it mentally, does not have dementia, and I don't think she would do anything rash with the property, but we do need to get power of attorney set up so that we can step in as needed to oversee these higher level decisions.   She has granted my sister durable POA if she is incapacitated, but we probably need a higher level of oversight than that.   

Just for the record, all of us would be totally ok if she did sell the property and spend all the money down.   It just would not be the most prudent financial approach.  It is not likely to come to that because she still has a significant amount in savings to cover any assisted living costs over and above what she gets from soc sec and her REIT investments.

I am really glad you clarified the issue with this follow-up post.

For a while there, it was sounding to me like you were about to act in your/your brother's best interest, not necessarily your mothers. That is a hard thing to accuse someone of, especially a stranger. Glad to see I was on the wrong track.

Goo day to you.

[dogboyslim]

I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

Why do you think Warren Buffett is such a fan of the estate tax?

[G-dog]

I do appreciate the listing of the different kinds of assets, but wealthy people who own these assets also have access to insurance markets, from which they can buy an insurance policy to generate the cash that would pay tax for the value of the estate. Insurance companies should be lobbying to keep the estate tax.

Why do you think Warren Buffett is such a fan of the estate tax?

But he's not leaving any money to his kids. Not sure about his wife (I assume some sort of trust, or co-ownership so not an inheritance). He is giving away most of his wealth (along with Bill and Melinda Gates, etc.). Of course, even his leftovers are sizable.

[talltexan]

It is fair to accuse Warren Buffet of benefitting from the estate tax. Many of his early business purchases were family businesses in which the Patriarch had built the business and wanted to pass control to a scion, but didn't have a tax-efficient way of doing it.

And, yes, he's done really well from understanding insurance and re-insurance as well.

But--in his defense--this required identifying businesses that were stable enough that when control was passed, they wouldn't fail. Nebraska furniture mart is an example that comes to mind. Many family firms quickly lose momentum when the scion fails to have the head for business of the patriarch (or Matriarch).

[act0fgod]

But he's not leaving any money to his kids. Not sure about his wife (I assume some sort of trust, or co-ownership so not an inheritance). He is giving away most of his wealth (along with Bill and Melinda Gates, etc.). Of course, even his leftovers are sizable.

Not sure I'd go so far as saying Buffett isn't leaving any money to his kids.  He's given a couple billion to each of the foundations his kids run, ie the foundations that pay his kids.

Like all of these threads on inheritance and the drama that goes with them, it's never really straight forward.

[talltexan]

I don't want my critical comment above to obscure my genuine admiration of Warren Buffet. If you think you can do what he did, understand that he was running three businesses of his own in Junior High (and that was before doing an MBA at Wharton and being a disciple of Ben Graham). By the time he was evaluating businesses like Sea's candies, he'd already seen hundreds of them.

He is truly the Mozart of Free enterprise.

[mtn]

Disclaimer: I greatly admire Warren Buffet, and would love to have a beer milkshake with the guy and talk about literally anything.

Buffet has so much money that his statements are slightly skewed. He could leave his kids only .001% (1/10,000) of his net worth, and they would still be considered independently wealthy (this is completely ignoring any and all taxes and assuming his net worth is all in cash, which is obviously completely missing the point). Yes, he is doing more good than almost anyone, and I greatly admire him, but don't think that he's not leaving his kids a fortune. It just isn't one of the largest fortunes in history that will be left to them.

[MMMaybe]

I think I just got my first taste of whats to come. My in-laws made us walk around their house and put our names on things we wanted to inherit. I found it really awkward, like being a vulture!

[mtn]

I think I just got my first taste of whats to come. My in-laws made us walk around their house and put our names on things we wanted to inherit. I found it really awkward, like being a vulture!

How did your spouse feel though? That stuff probably feels like hers/his anyways.

[Chris22]

Personally I really admire how both Buffett and Gates have handled the succession issue.

I admire what Buffett and Gates do because I think it makes them good people, but that doesn't mean I think their actions should be law.  Personally, I'm of the mind that estates should pass how the person who has the estate wants, and the state has no right to that money.  If the person who earned or otherwise held the money thinks it should go to their Paris Hilton-esque daughter to blow in a lifetime of partying and drugs and bullshit, so be it; I don't think the government should get their greedy hooks in it.

[Chris22]

I think I just got my first taste of whats to come. My in-laws made us walk around their house and put our names on things we wanted to inherit. I found it really awkward, like being a vulture!

My grandmother recently passed, and because most of her/our family is scattered pretty far around the country, we took some time when we were all in town for the funeral (grandkids/spouses, kids/spouses, etc) and went through her whole house and distributed as much as could be while everyone was there.  Did feel a little odd to do that the night of the wake/before the funeral (i.e., she wasn't even buried yet) but it made practical sense.  And honestly, she had plenty of "stuff" but almost none of it was anything anyone really wanted.  The Waterford crystal and china was distributed amongst the granddaughters and female grand-spouses, a few more valuable pieces of jewelry to the daughter and female spouses of the sons and the rest to the grandkids as they wanted, and then the odd picture or other memento was claimed, but in reality there is a whole small townhome's worth of stuff that no one really wants and is hard to give away.  Sadly, most of it just went into a dumpster.  The fortunate thing was that even though that side of the family doesn't always get along, the whole process with like 15 of us in the house was very civil and no one got bent out of shape about anything.  Anything saleable remaining (house, car, etc) will be sold and distributed equally to the three children of my grandma.

[mtn]

Personally I really admire how both Buffett and Gates have handled the succession issue.

I admire what Buffett and Gates do because I think it makes them good people, but that doesn't mean I think their actions should be law.  Personally, I'm of the mind that estates should pass how the person who has the estate wants, and the state has no right to that money.  If the person who earned or otherwise held the money thinks it should go to their Paris Hilton-esque daughter to blow in a lifetime of partying and drugs and bullshit, so be it; I don't think the government should get their greedy hooks in it.

Not to mention that with the size of their estates it really is a different picture entirely. If they lost roughly 80% of their net worth, they'd still be in the top 50 wealthiest people in the world, or close to it. It is really easy to say "Yeah, I'm going to donate 97% of my estate" when your estate is $2BIL (like the Hilton Fortune) because the remaining 3% is $60MIL.

I've always considered monetary wealth to be around $5,000,000. That gives you an annual residual income of $200k. That is wealthy. But it isn't in the same ballpark, or even same sport as the billionaires of the world. Hell, even with 3 heirs, a $12 million dollar estate doesn't even get each of the heirs the $5 million that I consider to be the wealthy marker.

(Don't dig deep into this--just take it on the surface level. I've left out taxes, the probably leg ups that a child of a 12mil estate has had their entire lives, etc.)

[mtn]

I think I just got my first taste of whats to come. My in-laws made us walk around their house and put our names on things we wanted to inherit. I found it really awkward, like being a vulture!

My grandmother recently passed, and because most of her/our family is scattered pretty far around the country, we took some time when we were all in town for the funeral (grandkids/spouses, kids/spouses, etc) and went through her whole house and distributed as much as could be while everyone was there.  Did feel a little odd to do that the night of the wake/before the funeral (i.e., she wasn't even buried yet) but it made practical sense.  And honestly, she had plenty of "stuff" but almost none of it was anything anyone really wanted.  The Waterford crystal and china was distributed amongst the granddaughters and female grand-spouses, a few more valuable pieces of jewelry to the daughter and female spouses of the sons and the rest to the grandkids as they wanted, and then the odd picture or other memento was claimed, but in reality there is a whole small townhome's worth of stuff that no one really wants and is hard to give away.  Sadly, most of it just went into a dumpster.  The fortunate thing was that even though that side of the family doesn't always get along, the whole process with like 15 of us in the house was very civil and no one got bent out of shape about anything.  Anything saleable remaining (house, car, etc) will be sold and distributed equally to the three children of my grandma.

No estate sale?

[zolotiyeruki]

Personally, I'm of the mind that estates should pass how the person who has the estate wants, and the state has no right to that money.  If the person who earned or otherwise held the money thinks it should go to their Paris Hilton-esque daughter to blow in a lifetime of partying and drugs and bullshit, so be it; I don't think the government should get their greedy hooks in it.

Yeah, I don't quite understand it either.  If the wealthy person decides to spend the money on a yacht or a mansion or a Bentley or eating at fancy restaurants, there's no extra tax.  But if they want to give it to their kids (upon their death), then the tax man demands an extra pound of flesh.  You can do the whole $14k-per-year thing, but it's not practical for large estates, and you also run the risk of depleting your assets too soon if you live too long.

Other than a blatant grab for cash, what's the purpose behind an inheritance tax?  What is the negative outcome that such a tax is preventing?

[jinga nation]

Personally, I'm of the mind that estates should pass how the person who has the estate wants, and the state has no right to that money.  If the person who earned or otherwise held the money thinks it should go to their Paris Hilton-esque daughter to blow in a lifetime of partying and drugs and bullshit, so be it; I don't think the government should get their greedy hooks in it.

Yeah, I don't quite understand it either.  If the wealthy person decides to spend the money on a yacht or a mansion or a Bentley or eating at fancy restaurants, there's no extra tax.  But if they want to give it to their kids (upon their death), then the tax man demands an extra pound of flesh.  You can do the whole $14k-per-year thing, but it's not practical for large estates, and you also run the risk of depleting your assets too soon if you live too long.

Other than a blatant grab for cash, what's the purpose behind an inheritance tax?  What is the negative outcome that such a tax is preventing?

Uncle Sam wants you to use it or lose it. And he doesn't want you to enjoy 'Hookers & Blow'.

[former player]

Other than a blatant grab for cash, what's the purpose behind an inheritance tax?  What is the negative outcome that such a tax is preventing?

Donald J Trump.

[plainjane]

Other than a blatant grab for cash, what's the purpose behind an inheritance tax?  What is the negative outcome that such a tax is preventing?

Beyond the moral hazard, the US already has a fairly poor amount of generational movement between the quintiles.  Wealth inequality is associated with social unrest, because the people who are at the bottom don't see any value in playing by the rules. Bread and circuses only work so well.  History shows if you don't give people legitimate opportunity for success, they will find other ways (crime, violence, rebellion) or they will drop out (drugs/alcohol). 

For me, this is much like the question of why we vaccinate, or educate kids.  It doesn't just make it better for them, it makes it better for everyone to live in a society where people have a chance to do cool things.

[talltexan]

perhaps it's my liberal roots showing, but I always saw the orderly transfer of an estate upon death as something that the government guarantees. If there were no government, then big daddy's death would mean the strongest person (perhaps the oldest male heir, perhaps not even someone in the family) would show up and take everything. So government guarantees an orderly transfer of these possessions through the probate process in accordance with the wishes of someone who's no longer even alive.

And, yes, there's a fee to pay for this guarantee, with larger estates paying more.